Malpractice standoff

November 28, 2007

Maryland Insurance Commissioner Ralph S. Tyler would like to see the amount that doctors pay out of pocket for medical malpractice insurance kept as low as possible. So would Medical Mutual, the physician-owned company that is by far the state's largest malpractice insurer. But somehow the two are deeply at odds over how to accomplish this.

At stake is $68.6 million that Medical Mutual wants to declare as a dividend. The company's proposal calls for $24 million to be distributed to current policyholders as a credit against their 2008 renewal, with the balance returned to the state to offset a taxpayer-financed premium subsidy.

But under an order issued by Mr. Tyler last week, the state could wind up taking the full $68.6 million - unless the company applies the bulk of it to reduce next year's rates.

That outcome would be quite similar to the company's proposal, but not exactly the same. Current policyholders would likely pay less for insurance next year, but officials with Medical Mutual say they would be stuck with a $24 million federal tax bill if a dividend is denied.

One can appreciate Mr. Tyler's motivations. He wants the most money possible going toward lowering premiums for all eligible doctors (and not just current policyholders). Medical Mutual's position is reasonable, too. Forcing it to pay a big tax bill for 2007 isn't going to help keep insurance rates down in the future.

Surely there's an opportunity to compromise. Mr. Tyler has called for the company to "propose a solution to mitigate rates next year." We would also call on the insurance commissioner to allow Medical Mutual some flexibility in how this is achieved.

Ultimately, the point is to keep health care costs as low, and physician services as widely available, as possible. That's why the General Assembly approved a temporary malpractice insurance subsidy three years ago.

When physicians pay less for insurance, consumers benefit. It allows doctors to stay in business and spares their patients from bigger medical bills. Negotiating how best to get this done should not be so difficult.